Abstract

This study examines the impact of oil shocks on the real exchange rate and the gross
domestic product in Norway using time series data from 1975 to 2008. The vector
autoregressive has been implemented using the cointegration and the Granger causality test.
The results of the study show that the increase in oil price is the reason behind Norway’s
GDP increase and the increase of its competitiveness to trade by its real exchange rate
depreciation. So it seems that oil price in this case is a blessing due to two reasons. First
Norway uses the floating exchange rate regime which is a good shock absorber, increases
the freedom of the monetary authority, and makes the adjustment smoother and less
expensive. The second reason is that Norway has more flexible labor markets,
improvements in monetary policy and smaller share of oil in production.

Item Type:

MPRA Paper

Original Title:

The Impact of Oil Prices on the Exchange Rate and Economic Growth in Norway

English Title:

The Impact of Oil Prices on the Exchange Rate and Economic Growth in Norway